Back before 2009, Progressives were pushing like crazy to get banks to write mortgages to low-income borrowers with bad credit. Banks that refused to do so would face the wrath of the banking regulators and lawsuits over redlining and ever other thing the Left could think of. Seriously, if you had tried to stop sub-prime lending in 2006 the Progressives would have excoriated you as being racist, hating the poor, etc. When the whole mess inevitably collapsed, the Progressives suddenly were there blaming this lending to low income people on the banks, accusing them of predatory lending practices.

OK, so now it is 2006 in the consumer credit market, and specifically in auto loans. Banks are making crap loans to no-credit individuals on cars and getting them off the books by securitization. So let's get Elizabeth Warren on the record right now. Should banks stop lending to these no-credit low-income people? My bet is that she would support this lending, doubly so because the Obama Administration feels on the hook still for their GM and Chrysler bailouts and would rather not see these companies tank (which they would if sub-prime credit suddenly dried up). So, before she can piously accuse banks of predatory practices 3 years hence when it all collapses, I want to know what Elizabeth Warren thinks of all this right now.

Update: Well, good news and bad news. Good news is that Elizabeth Warren has criticized sub-prime auto. Bad news is she appears to be totally on the wrong track with causes, talking not about the fact the loans should not be written at all but about the fact that she thinks dealers are reaping huge profits marking up the loans. It would be interesting to see what the Obama Administration would think about a clamp-down on sub-prime auto. Methinks they might freak out at that, knowing sub-prime loans are all that is keeping US automakers out of a new recession.

Quote of the day from Randal O'Toole on the closure of the entire Washington Metro yesterday for emergency safety inspections

The Washington Post’s architecture critic claims that the shutdown happened because “we decided to let our cities decay.” In fact, it’s because politicians decided that spending money on new construction projects, such as the Silverand Purple lines, would benefit their political careers more than spending it maintaining the existing system.

Before that, it’s because politicians decided to saddle Washington with an expensive, obsolete technology that the region can’t afford to maintain. Metro needs to spend $1.1 billion a year on maintenance to keep the system from deteriorating; it spent about a third of that in 2014, so it’s getting worse every year.

While I am not deeply worried about man-made climate change, I am appalled at all the absolutely stupid, counter-productive things the government has implemented in the name of climate change, all of which have costly distorting effects on the economy while doing extremely little to affect man-made greenhouse gas production. For example:

BadÂ government technology bets like the massive public subsidies of failed Solyndra

Even when government programs do likely have an impact of CO2, they are seldom managed intelligently. For example, the government subsidizes solar panel installations, presumably to reduce their cost to consumers, but then imposes duties on imported panels to raise their price (indicating that the program has become more of a crony subsidy for US solar panel makers, which is typical of these types of government interventions). Obama's coal power plan, also known as his war on coal, will certainly reduce some CO2 from electricity generation but at a very high cost to consumers and industries. Steps like this are taken without any idea of whether this is the lowest cost approach to reducing CO2 production -- likely it is not given the arbitrary aspects of the program.

For years I have opposed steps like a Federal carbon tax or cap and trade system because I believe (and still believe) them to be unnecessary given the modest amount of man-made warming I expect over the next century. I would expect to see about one degree C of man-made warming between now and 2100, and believe most of the cries that "we are already seeing catastrophic climate changes" are in fact panics driven by normal natural variation (most supposed trends, say in hurricanes or tornadoes or heat waves, can't actually be found when one looks at the official data).

But I am exhausted with all the stupid, costly, crony legislation that passes in the name of climate change action. Â I am convinced there is a better approach that will have more impact on man-made CO2 and simultaneously will benefit the economy vs. our current starting point. Â So here goes:

The Plan

Point 1: Impose a Federal carbon tax on fuel.

I am open to a range of actual tax amounts, as long as point 2 below is also part of the plan. Something that prices CO2 between $25 and $45 a ton seems to match the mainstream estimates out there of the social costs of CO2. I think methane is a rounding error, but one could make an adjustment to the natural gas tax numbers to take into account methane leakage in the production chain. I am even open to make the tax=0 on biofuels given these fuels are recycling carbon from the atmosphere.

A Pigovian tax on carbon in fuels is going to be the most efficient possible way to reduce CO2 production. What is the best way to reduce CO2 -- by substituting gas for coal? by more conservation? by solar, or wind? with biofuels? With a carbon tax, we don't have to figure it out. Different approaches will be tested in the marketplace. Cap and trade could theoretically do the same thing, but while this worked well in some niche markets (like SO2 emissions), it has not worked at all in European markets for CO2. There has just been too many opportunities for cronyism, too much weird accounting for things like offsets that is hard to do well, and too much temptation to pick winners and losers.

Yes, there are likely many politicians, given their incentives, that would love a big new pool of money they could use to send largess, from more health care spending to more aircraft carriers, to their favored constituent groups. But we simply are not going to get Conservatives (and libertarians) on board for a net tax increase, particularly one to address an issue they may not agree is an issue at all. So our plan will use carbon tax revenues to reduce other Federal taxes.

I think the best choice would be to reduce the payroll tax. Why? First, the carbon tax will necessarily be regressive (as are most consumption taxes) and the most regressive other major Federal tax we have are payroll taxes. Offsetting income taxes would likely be a non-starter on the Left, as no matter how one structures the tax reduction the rich would get most of it since they pay most of the income taxes.

There is another benefit of reducing the payroll tax -- it would mean that we are replacing a consumption tax on labor with a consumption tax on fuel. It is always dangerous to make gut-feel assessments of complex systems like the economy, but my sense is that this swap might even have net benefits for the economy -- ie we might want to do it even if there was no such thing as greenhouse gas warming. In theory, labor and fuel are economically equivalent in that they are both production raw materials. But in practice, they are treated entirely differently by the public. Few people care about the full productive employment of our underground fuel reserves, but nearly everybody cares about the full productive employment of our labor force. After all, for most people, the primary single metric of economic health is the unemployment rate. So replacing a disincentive to hire with a disincentive to use fuel could well be popular.

Point 3: Â Eliminate all the stupid stuff

Oddly enough, this might be the hardest part politically because every subsidy, no matter how idiotic, has a hard core of beneficiaries who will defend it to the death -- this the the concentrated benefits, dispersed cost phenomena that makes it hard to change many government programs. But never-the-less I propose that we eliminate all the current Federal subsidies, mandates, and prohibitions that have been justified by climate change. Ethanol rules and mandates, solar subsidies, wind subsidies, EV subsidies, targeted technology investments, coal plant bans, pipeline bans, drilling bans -- it all should go. The carbon tax does the work.

States can continue to do whatever they want -- we don't need the Feds to step on states any more than they do already, and I continue to like the 50 state laboratory concept. If California wants to continue to subsidize wind generators, let them do it. That is between the state and its taxpayers (and for those who think the California legislature is crazy, that is what U-Haul is for).

Point 4: Â Revamp our nuclear regulatory regime

As much as alternative energy enthusiasts would like to deny it, the world needs reliable, 24-hour baseload power -- and wind and solar are not going to do it (without a change in storage technology of at least 2 orders of magnitude in cost). The only carbon-free baseload power technology that is currently viable is nuclear.

I will observe that nuclear power suffers under some of the same problems as commercial space flight -- the government helped force the technology faster than it might have grown organically on its own, which paradoxically has slowed its long-term development. Early nuclear power probably was not ready for prime time, and the hangover from problems and perceptions of this era have made it hard to proceed even when better technologies have existed. But we are at least 2 generations of technology past what is in most US nuclear plants. Small air-cooled thorium reactors and other technologies exist that could provide reliable safe power for over 100 years. I am not an expert on nuclear regulation, but it strikes me that a regime similar to aircraft safety, where a few designs are approved and used over and over makes sense. France, which has the strongest nuclear base in the world, followed this strategy. Using thorium could also have the advantage of making the technology more exportable, since its utility in weapons production would be limited.

Point 5: Help clean up Chinese, and Asian, coal production

One of the hard parts about fighting CO2 emissions, vs. all the other emissions we have tackled in the past (NOx, SOx, soot/particulates, unburned hydrocarbons, etc), is that we simply don't know how to combust fossil fuels without creating CO2 -- CO2 is inherent to the base chemical reaction of the combustion. Â But we do know how to burn coal without tons of particulates and smog and acid rain -- and we know how to do it economically enough to support a growing, prosperous modern economy.

In my mind it is utterly pointless to ask China to limit their CO2 growth. China has seen the miracle over the last 30 years of having almost a billion people exit poverty. This is an event unprecedented in human history, and they have achieved it in part by burning every molecule of fossil fuels they can get their hands on, and they are unlikely to accept limitations on fossil fuel consumption that will derail this economic progress. But I think it is reasonable to help China stop making their air unbreathable, a goal that is entirely compatible with continued economic growth. In 20 years, when we have figured out and started to build some modern nuclear designs, I am sure the Chinese will be happy to copy these and start working on their CO2 output, but for now their Maslov hierarchy of needs should point more towards breathable air.

As a bonus, this would pay one immediate climate change benefit that likely would dwarf the near-term effect of CO2 reduction. Right now, much of this soot from Asian coal plants lands on the ice in the Arctic and Greenland. This black carbon changes the albedo of the ice, causing it to reflect less sunlight and absorb more heat. The net effect is more melting ice and higher Arctic temperatures. A lot of folks, including myself, think that the recent melting of Arctic sea ice and rising Arctic temperatures is more attributable to Asian black carbon pollution than to CO2 and greenhouse gas warming (particularly since similar warming and sea ice melting is not seen in the Antarctic, where there is not a problem with soot pollution).

Final Thoughts

At its core, this is a very low cost, even negative cost, climate insurance policy. The carbon tax combined with a market economy does the work of identifying the most efficient ways to reduce CO2 production. The economy benefits from the removal of a myriad of distortions and crony give-aways, while also potentially benefiting from the replacement of a consumption tax on labor with a consumption tax on fuel. The near-term effect on CO2 is small (since the US is only a small part of the global emissions picture), but actually larger than the near-term effect of all the haphazard current programs, and almost certainly cheaper to obtain. As an added benefit, if you can help China with its soot problem, we could see immediate improvements in probably the most visible front of man-made climate change: in the Arctic.

Postscript

Perhaps the hardest thing to overcome in reaching a compromise here is the tribalism of modern politics. I believe this is a perfectly sensible plan that even those folks who believe man-made global warming is a total myth ( a group to which I do not belong) could sign up for. The barrier, though, is tribal. I consider myself to be pretty free of team politics but my first reaction when thinking about this kind of plan was, "What? We can't let those guys win. They are totally full of sh*t. They are threatening to throw me in jail for my opinions."

It was at this point I was reminded of a customer service story at my company. I had a customer who was upset call me, and I ended up giving them a full-refund and a certificate to come back and visit us in the future. I actually suspected there was more to the story, but I didn't want a bad review. The customer was happy, but my local manager was not. She called me and said, "That was a bad customer! He was lying to you. How can you let him win like that?" Does this sound familiar? I think we fall into this trap all the time in modern politics, worried more about preventing the other team from winning than about doing the right thing.

The Arizona Republic reports that the Arizona Department of Water Resources has set six priorities for managing expected water shortages in the future. The six are listed in one of those annoying click-bait page-flipping things, so I will summarize them below:

If you live in Phoenix, you’re probably paying one of the cheapest annual water bills in the country, even with the rate increase that took effect this month, according to a recent national report on public water systems.

The February report by Food & Water Watch said the lead-tainted water supply in Flint, Michigan, was the most expensive in the country, with customers there paying $910.05 a year. It said Phoenix residents paid just $84.24 a year, then the lowest rate in the nation.

A city water department official said the rates could be a little misleading – rates jump for heavy users, one factor that has helped Phoenix keep water use down even as the number of water users has risen sharply.

This is absurd. Why does the state agency need to go around spying on private water use and begging for funding when price is such an obvious lever to match supply and demand. Raise the freaking prices! Are we drawing from lakes and groundwater faster than they can replenish themselves? Raise the dang price until demand falls to a sustainable level. As an extra bonus, this would help solve the funding problem, and have it solved by water users themselves rather than taxpayers.

By the way, I ask these questions but I actually know the answers -- government officials don't want to take the heat when the prices rise. They want to pander to the public and hand them populist goodies like cheap water, and then manage the inevitable water crisis with authoritarian actions like rationing and surveillance that increase their personal power.

And congrats to our newspaper: It has article after article, day after day, listing all the dire water shortages that face the area, and then they write this article with nary a mention that having the country's lowest water rates might be related.

I just got a bill for some extra property tax I owe to a county in California. The story behind it is sad and sort of hilarious.

A year or two ago I got billed in an audit for some "California use tax" on some golf carts we moved to California from Arizona. I hadn't thought I owed use tax on them because I paid sales tax in Arizona where I bought them. But California sales tax is higher than that in Arizona (naturally) so I apparently owed use tax on the difference. OK, I paid it.

Then, just recently, I was informed by one county in California that my property tax reports were wrong. I reported the value of the gold carts based on what I bought them for but I did not include the California use tax in the value. That had to be added to their value (even though in actuality the use tax made them less valuable). Anyway, I got a tax bill for the property tax I owe on the value of the use tax I paid for carts, which in turn was based on the higher rate of sales taxes charged in California than Arizona. All because I actually moved business assets into California.

Won't make that mistake again! Over the last 5 years I have pulled nearly a half million dollars in business assets out of California, terminated 5 contracts, and laid off nearly 100 employees there -- all mostly due to the hostile business environment there.

I wrote the other day that I had a close call, where Microsoft nearly updated my computer to Windows 10 from Windows 7 without my permission. Microsoft's Windows 10 code has become the most annoying bit of malware on my computer. I have had several readers as well as PCWorld recommend the free GWX control panel for making this threat go away. I tried it the other day and it is really easy to use and seems to make the problem go away. I cannot vouch for whether it creates any new problems, but so far so good.

We all have learned to live with the constant Windows 10 upgrade boxes, but the Microsoft upgrade campaign is becoming more insidious. Last week I got a message on my home (windows 7) computer that I as going to be upgraded in 3-4 days. For a while, I thought I had accidentally given them permission, but it turns out that MS is now upgrading computers to Windows 10 without permission. Only if you note the text of this email and explicitly stop it can you prevent the "upgrade" from occurring. From PC World:

Reports of unwanted Windows 10 upgrades have been circulating for the past few days on Reddit and Twitter, after the last Patch Tuesday. These users say they never approved or initiated the upgrade, and were dragged away from their Windows 7 (or perhaps Windows 8) installs anyway.

This is all part of Microsoft’s plan, of course. Last October, the company announced that it would reclassify Windows 10 as a “Recommended” update from older versions starting in early 2016, at which point many more users would get the upgrade without explicit permission. That reclassification began on February 1, and auto-upgrades have been rolling out ever since. If complaints are reaching a higher volume now, perhaps it’s because the rollout is getting more aggressive.

Here’s what the Recommended update looks like, according to ZDNet’s Mary Jo Foley: First, users will receive a notification saying their PCs are scheduled to receive Windows 10 in the next three or four days. Users can click a small link to cancel or postpone the update, but simply closing the window will cause the notification to appear again one hour before the scheduled update time. If users don’t cancel or postpone within that timeframe, the update will begin automatically.

Long-time readers know that while I have no particular problems with electric cars, I do think that the EPA uses fraudulent standards for evaluating the equivalent fuel economy or MPGe of electric vehicles. In short, the current Obama standard ignores the previous Clinton-era methodology and creates a crazy new standard that assumes fossil fuels are burned with perfect efficiency when making electricity. Most of my readers (but perhaps few Obama voters) will understand this assumption to be absurd. The result is, as discussed here in Forbes, that the current MPGe numbers for electric vehicles are overstated by a factor of 3 (specifically you need to multiply them by 36.5% to get the correct equivalent amount of fossil fuels that must be burned in the power plant to power the electric car). When this correction is made, cars like the Nissan Leaf are good (but not as good as a Prius) and cars like the old Fiskers Karma get worse mileage than a SUV.

As I wrote in the article on the Karma,

...electric vehicle makers want to pretend that the electricity to charge the car comes from magic sparkle ponies sprinkling pixie dust rather than burning fossil fuels. Take this quote, for example:

a Karma driver with a 40-mile commute who starts each day with a full battery charge will only need to visit the gas station about every 1,000 miles and would use just 9 gallons of gasoline per month.

This is true as far as it goes, but glosses over the fact that someone is still pouring fossil fuels into a tank somewhere to make that electricity. This seems more a car to hide the fact that fossil fuels are being burned than one designed to actually reduce fossil fuel use. Given the marketing pitch here that relies on the unseen vs. the seen, maybe we should rename it the Fisker Bastiat.

In the United States, motorists who buy a new Tesla Model S are eligible for an array of federal and local tax breaks because the all-electric sedan is considered a zero-emissions car. The story is different in Singapore, however, where the nation’s first Model S owner just found out his car is subject to heavy taxes because it’s lumped in the same category as some of the dirtiest new cars on the market.

Joe Nguyen explains he spent seven months trying to import a Model S that he bought in Hong Kong to his home in Singapore. The government’s Carbon Emissions-based Vehicle Scheme (CEVS) rewards motorists who import a used eco-friendly car with a roughly $11,000 tax break, but Nguyen was slapped with an $11,000 fine based on the conclusion that the S uses too much electricity.

“I don’t get it, there are no emissions. Then they send out the results from VICOM, stating that the car was consuming 444 watt hours per kilometer. These are not specs that I have seen on Tesla’s website, or anywhere else for that matter,” explained Nguyen in an interview with Channel NewsAsia.

A spokesperson for Singapore’s Land Transport Authority (LTA) said the fine is fair and completely justified.

“As for all electric vehicles, a grid emission factor of 0.5 g CO2/Wh was also applied to the electric energy consumption. This is to account for CO2 emissions during the electricity generation process, even if there are no tail-pipe emissions,” wrote the spokesperson in a statement. The LTA added that it had never tested a Model S before it received Nguyen’s car.

That means that, under Singaporean regulations, the Model S falls in the same emissions category as cars with an internal combustion engine that emits between 216 and 230 grams of CO2 per kilometer. In other words, it’s about as eco-friendly a high-performance, gasoline-burning models like the Audi RS 7, the Mercedes-AMG GT S, and the Porsche Cayenne S.

Actually, the US DOE does in fact publish electricity usage in watts per mileage driven. They list numbers in the range of 38 KwH per 100 miles for the Model S, which would be about 238 watt hours per kilometer, so such numbers exist though Singapore thinks the car is less efficient than does Obama's DOE. By my calculation the true MPGe (if the DOE's electric efficiency numbers are trustworty) of the car should be around 32, which is good for a large performance car (and well better than the competitive cars cited) but probably not lofty enough to deserve a subsidy. Singapore's calculations that the Model S is as dirty as these cars on a CO2 emissions basis may still be correct even if it is more efficient if most of Singapore's electricity is produced by coal.

Her rules for social media seem about dead on, at least in actual practice. Here are a few:

2. Be shocked and outraged at least once a day. If you can’t start a tweet or Facebook status with “HOW DARE YOU” then it’s probably not worth saying.

3. If strangers online disagree with you, devote your day to yelling at them and getting everyone you know to yell at them as well. Don’t just unfollow them. Track them down and destroy them. Put your entire life on hold to focus on all-caps fights with them. It’s pretty much the written equivalent of public scream-crying and people fucking LOVE that.

...

7. Intentionally misread satire. Get really pissed about it. Share it online and demand that everyone else share it too. Then get more pissed when others clarify that it’s clearly sarcasm. Block those people. Block them as loudly and as hard as you can.

I have always thought that government policy to encourage home ownership was counter-productive, even beyond its role in creating bubbles. My sense is that those who advocate for such programs are engaging in what I call cargo cult economics.

Once upon a time, government officials decided it would help them keep their jobs if they could claim they had expanded the middle class. Unfortunately, none of them really understood economics or even the historical factors that led to the emergence of the middle class in the first place. But they did know two things: Middle class people tended to own their own homes, and they sent their kids to college.

So in true cargo cult fashion, they decided to increase the middle class by promoting these markers of being middle class [without any consideration of which direction the arrow of causation ran]. They threw the Federal government strongly behind promoting home ownership and college education. A large part of this effort entailed offering easy debt financing for housing and education.

I tend to be a lone voice in the wilderness on this (even those who oppose government programs for libertarian reasons often tend to fetishize home ownership). But Ike Brannon at Alt-M seems to agree:

The pro-home-building folks aver that homeownership fosters civic involvement and helps people become more tied to their community, which encourages other behavior beneficial for the economy. And for a good proportion of homeowners the majority of their net wealth is in their home, so it can be an important source of savings.

But another way to look at it is that correlation is not causation: The reason that homeowners are more civic-minded and involved in the community is because such people are much more likely to have the wherewithal to save enough to make a downpayment on a house. Ed Glaeser, the renowned housing economist from Harvard, puts little stock in the notion that homeownership has significant positive societal externalities.

What's more, there's some evidence that high homeownership rates have downsides as well. In the last four decades the predilection for moving has slowed significantly: only half as many people moved across state or county lines in any year this decade as was the case in the 1950s, for instance. This is problematic because it means that our economy is worse at matching up workers with where the available jobs are. The lingering unemployment in many rust-belt states would be less if some of their unemployed could be persuaded to move to another community where there are jobs. There has been a decades-long move of people from the midwest to the Sunbelt, of course, but the data suggest there's ample room for more. This hasn't happened in part because people are tied down by the homes that they own and are reluctant to sell while they are underwater. That people are unable to ignore sunk costs isn't economically rational, of course, but it nevertheless governs how many people consider whether to move.

But just because voters are ideologically mixed does not mean they are centrists at heart. Many voters support a mix of extremeliberal policies (like taxing the rich at 90 percent) and extremeconservative policies (like deporting all undocumented immigrants). These voters only appear âcentristâ on the whole by averaging their extreme views together into a single point on a liberal-conservative spectrum....

Donald Trumpâs rise exemplifies these dangers.

Political scientists and pundits alike argue that it would improve governance to devolve political power from the political elites who know the most about politics and policy to the voters who know the least. Polarization scholars hold these uninformed voters in the highest esteem because they look the most centrist on a left-right spectrum. They are also Donald Trumpâs base.

Yes, you read that right. Political scientists have long exalted the centrist wisdom of those who now constitute some of Trumpâs strongest supporters â the poorly educatedauthoritarianxenophobes who are attracted to a platform suffused with white supremacy, indulge in unapologetic nationalismÂ and use violence to silence opponents. As commentator Jacob Weisberg has written, these extreme votersâ views are a mix of âwacko left and wacko rightâ â the key credential one needs to qualify as centrist by scholarsâ most popular definition.

A large part of the problem is the left-right political spectrum with which we are saddled. Â This spectrum was pushed on us by Marxist academics of the 1950's-1970's. Â It is meant to show a spectrum from really bad (with fascism at the far Right) to really good (with their goal of communism on the far Left)**. Â For some reason non-Marxists have been fooled into adopting this spectrum, leaving us with the bizarre scale where our political choices are said to lie on a spectrum with totalitarianism on one end and totalitarianism on the other end -- truly an authoritarians "heads I win, tails you lose" setup. Â In this framework, the middle, whatever the hell that is, seems to be the only viable spot, but Brookman is arguing above that the middle is just a mix of untenable extreme positions from the untenable ends of the scale.

The Left-Right spectrum is totally broken. Â Trump is unique in the current presidential race not because he appeals to centrists, but because he simultaneously demagogues both the Conservative civilization-barbarism language and the Liberal/Progressive oppressor-oppressed narrative. Â The fact that his supporters find appeal in extreme versions of both narratives does not mean they should average to centrists. Â A libertarian like myself would say that they are extremists on the far authoritarian end of the liberty-coercion axis Â (I, of course, am an extremist as well on the other end of this scale).

** Postscript: This is part of a long history of the Left trying to define political terms in their favor. Â I love the work on totalitarianism by Hanna Arendt, but you will sometimes hear academics say that Arendt was "repudiated" (or some similar term) in the 1960's. Â What actually happened was that a new wave of Leftish professorsÂ entered academia in the 1960's who admired the Soviet Union and even Stalin. Â They did not like Arendt's comparison of Nazism and Stalinism as being essentially two sides of the same coin, even though this seems obvious to me. Â Nazism and Stalinism were, to them, opposite sides of the political spectrum, from dark and evil to enlightened. Â Thus they dumped all over Arendt, saying that her conclusions did not accurately describe the true nature of life under communism. Â And so things remained, with Arendt pushed to the margins by Leftish academics, until about 1989. Â As the iron curtain fell, andÂ new intellectuals emerged in Eastern Europe, they cast about for a framework or a way to describe their experience under communism. Â And the person they found who best described their experience was... Hannah Arendt.

A while back, I was in Houston and having dinner at the bar of one of my favorite steakhouses (Eddie V's). Â The guyÂ next to me was apparently the owner of aÂ gate guard company. Â Given that what he does is sort-of similar in some ways to what my company does, we chatted for a bit.

Anyway, he asked me at one point if my employees were independent contractors. Â I told him no, even though by the text of labor law they probably could be. Â However, even if it would be legal by statute, life was too short to try it because the Department of Labor HATES the independent contractor designation. Â This designation has the effect of making the Department of Labor irrelevant (since most of what they enforce does not apply to independent contractors) and there is nothing worse than making a regulator irrelevant. Â In effect, while defensibly legal, making such a designation would be like putting a big "kick me" sign on my back and inviting years of Department of Labor harassment.

This is when he told me that his gate guards are independent contractors and that he actually beat the Department of Labor. Â Â Not only did he win his case and get awarded a million two in attorneys fees from the DOL, but he was also awarded $300,000 from the courtÂ for aggravation. I refused to believe him until he showed me a picture of him with the check. He had had it blown up into one of those huge golf tournament checks. I told him he was my hero and tried to buy him drinks the rest of the night, but when I got up to leave, I found he had actually paid my tab. Â I drank that evening on the Department of Labor's dime, I guess.

The next morning, I couldn't shake the sense that he was having me on. Â After all, one might eventually prevail against the bureaucracy (I onceÂ won my own case against the DOL). Â But attorneys fees? Â And a payment for aggravation?

But it turns out to all be correct. Â A couple of weeks ago the indispensible Walter Olson featured the Gate Guard story in an article at Cato. Â From the judge's decision:

It is often better to acknowledge an obvious mistake than defend it. When the government acknowledges mistakes, it preserves public trust and confidence. It can start to repair the damage done by erroneously, indeed vindictively, attempting to sanction an innocent business. Rather than acknowledge its mistakes, however, the government here chose to defend the indefensible in an indefensible manner. As a result, we impose attorneysâ fees in favor of Gate Guard as a sanction for the governmentâs bad faith.

At nearly every turn, this Department of Labor investigation and prosecution violated the departmentâs internal procedures and ethical litigation practices. Even after the DOL discovered that its lead investigator conducted an investigation for which he was not trained, concluded Gate Guard was violating the Fair Labor Standards Act based on just three interviews, destroyed evidence, ambushed a low-level employee for an interview without counsel, and demanded a grossly inflated multi-million dollar penalty, the government pressed on. In litigation, the government opposed routine case administration motions, refused to produce relevant information, and stone-walled the deposition of its lead investigator.

By the way, for small business owners, I wrote (a long time ago, at least in the blogging world) a multi-part article with a description and my advice from my run-ins with the Department of Labor. Â Part 1 begins here.

I had this argument the other day with my mother-in-law -- you can't allow a President more power just because he is "your guy" and you trust him. No matter how well you think that person will use the power (and I trust no one), you are setting a precedent for the next guy whom you may very well not like. I wrote this way back in 2005:

Technocratic idealists ALWAYS lose control of the game. It may feel good at first when the trains start running on time, but the technocrats are soon swept away by the thugs, and the patina of idealism is swept away, and only fascism is left. Interestingly, the technocrats always cry "our only mistake was letting those other guys take control". No, the mistake was accepting the right to use force on another man. Everything after that was inevitable.

For years I have asked liberals -- who have cheered President Obama's power grabs as righteous on the basis that "Congress won't don anything, so Obama has to" -- how comfortable they will we with a President Lindsey Graham using the same powers.

I was frequently dismissed, but not any more -- as folks on the Left begin to wake up and imagine President Trump using the same powers wielded by Obama. To this end, the New York Times has a good article on Obama's drone war and the precedent set for the next President:

President Bush started the drone wars, but Mr. Obama vastly expanded them. Almost entirely on his watch, United States strikes have killed as many as 5,000 people, possibly 1,000 of them civilians. The president approved strikes in places far from combat zones. He authorized the C.I.A. to carry out “signature strikes” aimed at people whose identities the agency did not know but whose activities supposedly suggested militancy. He approved the deliberate killing of an American, Anwar al-Awlaki.

The president also oversaw an aggressive effort to control the public narrative about drone strikes. Even as senior officials selectively disclosed information to the news media, his administration resisted Freedom of Information Act lawsuits, arguing that national security would be harmed if the government confirmed drone strikes were taking place.

The administration also argued in court that federal judges lacked the authority to say whether drone strikes were lawful. It refused to release the evidence that it claimed made Mr. Awlaki a lawful target. In lieu of information, the administration offered assurances that the president and his aides were deeply moral people who agonized over authorizing lethal force.

That last line is perhaps the most dangerous single argument in all of democracy, that it is somehow OK to give an individual enormous extra-Constitutional powers because you trust that individual. Only now, at the end, do they understand:

But as this election season has underscored, powers this far-reaching should not rest solely on the character of the president and his advisers. In a democracy, the ability to use lethal force must be subject to clear and narrow limits, and the public must be able to evaluate whether those limits are being respected.

When discussing Trump, I see a lot of writers referring to 20th century precedents of populist autocrats. But if you want to be worried about American democracy, a better example is perhaps the Roman Republic. The Republic was not killed by one man, even Julius Caesar. The Republic fell through the slow accretion of autocratic precedents over nearly a hundred years, many of which were set by folks like Gracchus (who seems to have been a well-intentioned reformer) and Sula (who was a hero in Rome).

This video below is pretty good, though it addresses only one of the two major distortions created by government. In addition to the incentives, even mandates, to issue risky mortgages discussed below, Basel II capital standards created really strong incentives for banks to prefer holding mortgage-backed securities.